The war in Ukraine is moving toward escalation. Its possible signs are the termination of the "grain deal", and the new attack on the Crimean bridge, the ongoing offensive of the Armed Forces of Ukraine in the Zaporizhzhia direction, and Russian forces in the Kupyansky direction.
At the same time, the Black Sea coast of Ukraine is again turning into a full-fledged war zone (after a period of partial demilitarization per agreements on the export of Ukrainian agricultural products, which lasted 1 year - from July 22, 2022, to July 17, 2023).
And, a new battle for control of the northwestern Black Sea (and Ukraine's ability to use its ports for international trade) could play a key role in the strategic dimension of the war.
So June 17, 2023. The Russian Federation pulled out of the “grain deal”. They also announced that they were withdrawing guarantees for the safety of navigation in the northwestern Black Sea, and the joint coordination center in Istanbul would also be disbanded.
The main reasons why the Russian leadership did not consider it necessary to renew the grain deal:
● Russia has failed to ease sanctions pressure. The Russian Federation demanded the fulfillment of several conditions regarding its export of agricultural products, trade insurance, the return of the Russian Agricultural Bank to the SWIFT international payment system, the export of ammonia, etc.
● Completion of the Presidential elections in Turkey, no need to support R. Erdogan,
● Turkey's closer cooperation with Ukraine and with Western countries also negatively influenced the decision of the Russian Federation.
● An element of the economic war against Ukraine, an attempt by the Russian Federation to deprive it of budget revenues from agricultural exports, and the struggle for grain and food markets in the world.
As a result, Ukraine's export profit will decrease significantly - by almost a quarter. According to our calculations, exports through ports brought Ukraine about $14.7 billion (total export profit in 2022 was $44 billion). Tentatively, exports under the grain deal could bring Ukraine about $10 billion. The work of the grain corridor is especially important for Ukraine against the background of the decision of the European Commission, which imposes a ban on the most exported products from Ukraine, which make up 35% of all export profits.
For the export of products, Ukraine will continue to use the ports of the Danube, and, possibly, will organize coastal navigation along the coasts of Ukraine, Romania, and Bulgaria (the Ukrainian government promises to insure such cargoes). In turn, it can be expected that if the Russian Federation does not start attacking these ships (this is unlikely), then it will use all sorts of provocations and mining routes, and destroy the port infrastructure of Ukraine, which will greatly complicate maritime transportation. New missile and bomb strikes of the Russian Federation on the Odesa, Mykolaiv regions of recent days, as well as on the Zmiiny island, is just an attempt to demonstrate that without an agreement with the Russian Federation, exports from Ukraine are impossible.
The situation for Ukraine is aggravated by the arrival of a new crop and the limited capacity of its storage.
At the same time, the suspension of the "Grain Deal" also means the removal from Ukraine of obligations not to use the port infrastructure for military purposes. And now Ukrainian ports can also be used for the supply of weapons (of course, taking into account significant security risks).
Another sign of escalation, as well as a reason for the Russian Federation to break the grain agreement, was the explosion on the Crimean Bridge. The incident took place on the night of July 17, 2023. One span of the bridge in the direction of Taman was destroyed, and the second - in the direction of Kerch - sank. Since the railway part of the bridge was not damaged, the explosion will not have a significant impact on the logistics of Russian troops in southern Ukraine, but it will affect the socio-economic and tourist situation on the peninsula.
Most likely, Ukrainian forces were behind the explosion. In Ukraine, they expected that the Russian Federation would not extend the grain corridor and were preparing for this. The attack on the Crimean Bridge also sends a message to the domestic audience - Ukraine does not change its territory for export and does not give up Crimea.
On the part of Ukraine, this is also an attempt to focus attention on the weaknesses of the Putin regime, provoking its internal opponents to another attack on the Kremlin. A signal that the Russian Federation cannot protect its critical infrastructure and give a decent response.
Recall that after the first explosion of the Crimean Bridge in October 2023. The Russian Federation launched a campaign of missile terror, which was aimed at destroying the energy infrastructure of Ukraine (at least 30% of generating capacities were destroyed and damaged).
At the front, attacks by the Armed Forces of Ukraine continue to the south and north of the city of Bakhmut. According to the General Staff, the Armed Forces of Ukraine knocked out the Russians from positions near Orikhove-Vasylivka in the Bakhmut direction. Ukrainian forces are striving to succeed near the city of Bakhmut to develop the offensive further to the southeast from there.
In the south, in the Zaporizhzhia region, Ukrainian troops continue offensive operations in the Melitopol and Berdyansk directions. The Armed Forces of Ukraine confirmed the occupation of part of Staromayorsky - the village on the Vremevsky “ledge.” The Ministry of Defense of Ukraine reports that Ukrainian troops liberated almost 18 sq. km last week and 210.5 sq. km. from the start of the counteroffensive. In particular, during the week it was released: 7 square meters. km. on the southern flank around Bakhmut (from the beginning of the counteroffensive - 31 sq. km.), And 10.9 sq. km. in the south (179.5 sq. km. from the moment of the counteroffensive).
It is reported about the offensive of Russian troops in the Kupyansky direction, in the Kreminna-Lyman area. At the same time, it is unlikely that we are talking about a large-scale offensive. The tactical offensive of the RF Armed Forces in this direction is more of a distraction (an attempt to force Ukraine to transfer reserves from the Zaporizhzhia Front). Also, an attempt by the Russian Federation to create a threat from the north for Ukrainian troops in the city of Seversk and the settlement of Bilogorivka is visible, the seizure of territories in this area can provide defense for the occupied part of the Luhansk region. In general, the RF Armed Forces are striving to reach the left bank of the Seversky Donets to occupy a more convenient line of defense. For this, an offensive is also underway towards the Lyman and the Serebryansky forestry.
It is possible that, given the slow pace of the counteroffensive, Ukrainian troops may go on the defensive in the fall.
In the domestic politics of the country, once again there is an escalation of conflict and competition between the presidential vertical and local elites for financial flows, which may also indicate preparations for parliamentary and presidential elections. Thus, the head of the Servant of the People faction in the Verkhovna Rada of Ukraine, David Arakhamia, threatened to close access to local authorities to purchases during the war. He noted that if local councils do not stop spending money on non-essential items, on something that does not bring us closer to victory, then the parliament will introduce legislative restrictions for the period of martial law.
Local budgets grew during the war thanks to a significant increase in personal income tax revenues. Local budgets make up about 25% of the state budget. For comparison: in 2020, their total amount was UAH 470 billion, and this year it is planned to reach more than UAH 600 billion. The state budget for 2023 is UAH 2.6 trillion. on expenses.
A platform for monitoring recovery costs will be launched in Ukraine. The Center for Economic Strategy, the Institute for Economic Research and Policy Consulting, and NGO Progress Technologies have started work on the European Union-funded project "Recovery Cost Control". The project provides for the creation of a system independent from the government for monitoring the expenditure of budgetary and donor funds. According to World Bank estimates, Ukraine's needs for restoration and reconstruction have increased to $411 billion. According to Prime Minister Denys Shmygal, the damage caused to Ukraine as a result of the war exceeds $700 billion.
The launch of this project may be the result of a certain mistrust of European partners towards representatives of the Ukrainian authorities. Thus, the allied countries seek to control, independently of the government, the spending of large funds allocated for the restoration of Ukraine. Recall that the European Commission proposes to reserve €50 billion for Ukraine in the EU budget for the next four years. The European Union plans to cover 45% of all Ukraine's funding needs by 2027.
Since the beginning of 2023, the country's budget has already received about $23 billion. According to the new draft budget for 2023, it is planned to attract only $38-40 billion of foreign aid by the end of the year (that is, about half of the funds).
At present, the allied countries have already announced registered obligations to Ukraine of about 165.4 billion euros. USA - 70.7 billion euros; European Union - 68.4 billion euros; Other countries - 26.3 billion euros
Military situation
Combat actions.
The situation in the Kharkiv region: In the Kupyansk direction, the RF Armed Forces are storming in the areas of Masyutivka, and Novoselovsky, trying to force the Armed Forces of Ukraine out of Oskol.
In Donbas: The Armed Forces of the Russian Federation stopped actively advancing in the Limansky, Bakhmutsky, Maryinsky, and Avdiivsky directions. The main local clashes are taking place in the areas of the cities of Bakhmut, Maryinka, and Avdiivka. The attacks of the RF Armed Forces were repulsed in the area of the settlements of the Serebryansky forest in the Luhansk region.
In the Donetsk region attacks were repelled - in the areas of the settlements of Krasnogorivka, Rivne, Novomykhaylivka, Bogdanivka, Vesele, Pervomaisky, Orikhovo-Vasylivka, Grigorivka, Ivanivske, and southeast of the Bila Gora.
The situation in the South: In the Zaporizhzhia Oblast, Ukrainian troops continue offensive operations in the Melitopol and Berdyansk directions in the area of Makarivka, Staromayorske; Novodarivka, Priutne; Mala Tokmachka, Novopokrovka; Pyatikhatki, Grozovo. The Armed Forces of Ukraine confirmed the liberation of part of Staromayorsky - the village on the Vremevsky “ledge.”
Black Sea-Azov direction: without significant changes. there are 14 ships in the Black Sea, and 2 of them are equipped with 12 "Caliber".
The Russian Federation has again stepped up attacks on critical infrastructure and military installations, with the Odessa region becoming the main direction of attack.
According to the military command of Ukraine, on the night of July 19, during several waves of attacks, the Russian Federation used:
- 16 "Caliber", presumably from the small missile ship "Ingushetia" and the frigate "Admiral Essen" from the Black Sea. Downed 13.
- eight X-22 cruise missiles from Tu-22M3 aircraft in the Black Sea. Not one was hit.
- six Oniks cruise missiles from the Bastion coastal missile system in Crimea. Not one was hit.
- one X-59 guided air missile from a Su-35 fighter from the Black Sea. Shot down.
- 32 Shahids from the Chauda training ground (Crimea) and Primorsko-Akhtarsk (Rostov region). Downed 23.
It is reported that the Kh-22 and Oniks missiles that were not shot down by air defense were sent to the infrastructure of the Odessa region.
Combat map.
Explosion on the Crimean Bridge.
On the night of July 17, an explosion occurred on the Crimean Bridge. It was reported that one span of the bridge in the direction of Taman was destroyed, and the second - in the direction of Kerch - sank. Fragments of jet skis were found in the area of 145 pillars of the Crimean Bridge.
The press secretary of the President of the Russian Federation D. Peskov commented on the blowing up of the Crimean Bridge: "If we take the final perspective, then the answer will be the achievement of the goals of the NVO; "We know who is behind this";
Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev called for the assassination of the top military-political leadership of Ukraine after the explosion of the Crimean Bridge. " It is necessary to blow up their own houses and the houses of their relatives. Search for and eliminate their accomplices, abandoning the insipid idea of a trial against them. But the main thing is to destroy the top leadership of terrorist groups, in whatever cracks these insects hide. It is difficult but possible", - D. Medvedev wrote. It should be noted that exactly a year ago D. Medvedev threatened Ukraine with a "doomsday" in the event of an attack on the Crimean bridge.
The media reported that at the time of the explosion, allegedly on the Crimean bridge, an MQ-9 Reaper reconnaissance and strike drone of the US Air Force allegedly flew over the Black Sea.
The Ukrainian media reported that the attack on the bridge was carried out by the SBU and the Ukrainian Navy using sea drones. The SBU hints at its participation in the new undermining of the Crimean Bridge. The department publishes a rhyme that the bridge "went to sleep" and clarifies that "folk music, the words of the SBU." The SBU announced that they would publish information about the undermining of the Crimean Bridge after the victory. "So far, we are watching with interest how one of the symbols of the Putin regime once again failed to withstand the military load," said Artem Dekhtyarenko, spokesman for the SBU.
At the same time, the operational command "South" suggests that the damage to the Crimean bridge is a "Russian provocation" in order not to renew the grain deal, which expires today - July 17.
As for the consequences, since the railway part of the bridge was not damaged, the logistics of Russian troops in southern Ukraine will not be critically affected by the current explosion.
The next day, an ammunition depot at a training ground in the Kirovsky district in the east of the peninsula will detonate in Crimea. Because of this, the Tavrida highway has already been blocked, and about two thousand residents can be evacuated from the surrounding areas. Resettlement is being carried out from four villages: Krinichki, Aivazovskoye, Abrikosovka, and Privetnoe. It is reported that people are being relocated for at least a day.
Domestic policy.
The Verkhovna Rada may block local authorities from public procurement for the period of martial law.
In the domestic politics of the country, once again there is an escalation of conflict and competition between the presidential vertical and local elites for financial flows, which may also indicate preparations for parliamentary and presidential elections.
The Verkhovna Rada may block local authorities from public procurement for the period of martial law. The head of the Servant of the People faction in parliament, David Arakhamia, threatened to block local authorities from accessing purchases during the war. In his telegram channel, the people's deputy published a post - " last warning ". He noted that if local councils do not stop spending money on non-essential items, on things that do not bring us closer to victory, then the parliament will introduce legislative restrictions for the period of martial law. " We are actively discussing the idea of limiting the use of these funds in Parliament, but we are only stopped by what we know: when we do this, you will start shouting about the "attack on decentralization", that "the authorities are attacking local self-government" and spread other similar messages ", - wrote D. Arakhamia. He believes that "very serious dissatisfaction" is brewing in society with the actions of local authorities in connection with "all these stories about drums, stadiums, luxury vegetable cutters, shifting paving stones ." Local budgets grew during the war thanks to a significant increase in personal income tax revenues. Also, a significant filler of local budgets is transferred from the state budget.
Local budgets during the war grew up. The main source of filling local budgets is the personal income tax (PIT) - 18% of the official income of citizens. Before the war, income from personal income tax to local budgets, according to a study by the Center for Joint Actions, ranged from 45% to 55%. At that time, 60% of personal income tax was distributed to local councils. Since November 2021, when a memorandum was signed to curb natural gas prices for district heating, local councils have added another 4% personal income tax.
Local budgets make up about 25% of the state budget. For comparison: in 2020, their total amount was UAH 470 billion, and this year it is planned to reach more than UAH 600 billion. This is a big figure. The state budget for 2023 is UAH 2.6 trillion in expenditures.
A platform for monitoring recovery costs will be launched in Ukraine.
The Center for Economic Strategy, the Institute for Economic Research and Policy Consulting, and NGO Progress Technologies have started work on the European Union-funded project "Recovery Cost Control". The project provides for the creation of a system independent from the government for monitoring the expenditure of budgetary and donor funds.
To implement the project, a separate online platform Big Recovery Portal is being developed, which will allow:
maintain an open database of restoration projects implemented by the state, communities, donors, and philanthropists;
- monitor the costs of these projects from open sources;
- analyze the priority and expediency of projects, their risks, and possible flaws;
- involve active citizens and public organizations in monitoring specific restoration projects through a feedback mechanism.
The Big Recovery Portal will be integrated with the Prozzoro e-procurement system, the damaged.in.ua database of objects destroyed during the Russian aggression, and other sources of open data. The portal will interact with the digital restoration ecosystem DREAM (Digital Restoration Ecosystem for Accountable Management), which is being developed by the Ministry of Communities, Territories, and Infrastructure Development together with the RISE coalition.
Recovery monitoring results will be presented monthly and urgent issues discussed with experts and government officials. Also, the project will allow active citizens and regional public organizations to join the monitoring and evaluation of restored or built facilities (primarily social infrastructure). To do this, the team will provide sub-grants and conduct training for civil society. Additionally, the project provides grant support for activists in the analysis of public procurement in the field of restoration.
According to the World Bank, Ukraine's needs for restoration and reconstruction have increased - up to $411 billion. According to Prime Minister Denys Shmyhal, the damage caused to Ukraine as a result of the war exceeds $700 billion. Recall that the European Commission proposes to reserve €50 for Ukraine in the EU budget billion over the next four years. The European Union plans to cover 45% of all Ukraine's funding needs by 2027.
At present, the allied countries have already announced registered obligations to Ukraine of about 165.4 billion euros. (according to the Kiel Institute for the World Economy). USA - 70.7 billion euros; European Union - 68.4 billion euros; Other countries - 26.3 billion euros.
Since the beginning of 2023, the country's budget has already received about $23 billion. Recall that according to the new draft budget for 2023, by the end of the year, it is planned to attract only $38-40 billion of foreign aid (that is, about half of the funds).
The Recovery Expenses Control project, which provides for the creation of a system independent of the government for monitoring the expenditures of budgetary and donor funds, is the result of a certain distrust of European partners in representatives of the Ukrainian authorities. Thus, the allied countries seek to independently control the spending of large funds allocated for the restoration of Ukraine.
Sociology.
The President of Ukraine enjoys high support among the population in the leading countries of the world such as the USA, Great Britain, Canada, Germany, etc. As a new Pew Research Center survey shows, the population in 24 countries has a positive attitude towards the President of Ukraine Volodymyr Zelensky, about 51 people express confidence in him %. 39% hold the opposite opinion. But views on V. Zelensky vary by country, with less than half trusting his leadership in 10 countries, including NATO member states Hungary (11%), Greece (28%), and Italy (38%). Trust in Zelensky ranges from 86% in Sweden to just 11% in Hungary. Apart from Hungary, half or more distrust the Ukrainian leader in Greece, Mexico, Italy, Israel, Brazil, and Argentina. In the UK, V. Zelensky is supported by 77%; in the Netherlands - 73%; in Poland - 70%; in Canada - 65%; in Germany - 62%; in the USA - 56%; in Spain - 55%; in France - 50%.
Positive opinion about NATO in the 11 member countries surveyed ranges from 93% in Poland to 40% in Greece. And in Sweden, which is currently negotiating to join NATO, 78% are positive about the alliance. Among these countries, NATO's goodwill has historically been largely stable and especially high since the Russian invasion.
Defense Minister A. Reznikov proposed to place foreign military bases in Ukraine.
Ukrainian Defense Minister Oleksiy Reznikov said that some provisions of the Ukrainian constitution need to be clarified before the country joins NATO. He called the constitutional provision on the inadmissibility of the deployment of foreign military bases on the territory of the republic obsolete.
A. Reznikov called to supplement Article 17 (on protecting the sovereignty and territorial integrity of Ukraine) with the thesis that Ukraine independently chooses mechanisms to ensure its security, in particular by joining international treaties or organizations. " This will more clearly reveal and normalize the idea of a European and Euro-Atlantic course, laid down in paragraph 5 of the preamble," the head of the Defense Ministry explained.
" It is clear that, if necessary, you can find a legal formula so as not to call the base a base, but some kind of "center for interaction and exchange of experience" or something else. But why? This restriction, which has lost its relevance, must be removed to destroy the ground for speculation " - said the Minister of Defense.
In Art. 17 of the Constitution of Ukraine, in particular, it is said that: “ On the territory of Ukraine, the creation and functioning of any armed formations that are not provided for by law is prohibited. The deployment of foreign military bases is not allowed on the territory of Ukraine. Recall that during the war to make changes to the Constitution is prohibited.
At the same time, President Volodymyr Zelensky said that Ukraine is not interested in deploying foreign troops on its territory. He said this when answering a question from journalists about the initiative expressed in Poland to deploy Polish peacekeeping units in Ukraine. " No one raises the issue of deploying Polish troops in our country. Neither the NATO countries nor we are interested in this - as long as we are not in the Alliance so that we have one or other foreign armed forces. Ukraine's armed forces are enough, the only question is modern NATO-style weapons," the President said.
\The situation around Ukraine.
The grain agreement was suspended.
July 17, 2023, Russia announced the termination of the "grain agreement", which became clear from the statement of the Kremlin's press secretary D. Peskov. The Russian Foreign Ministry also stated that it allegedly "officially informed Turkey and Ukraine of its objections to the extension of the" grain agreement. center in Istanbul.
According to rumors, in Ukraine, they were sure that the "grain deal" would not be extended and were preparing for this. The strike on the Crimean Bridge was, in a way, the final chord of the deal, most likely Ukrainian forces were behind it. For an internal audience, it looks like Ukraine does not exchange territories for trade and does not refuse Crimea.
In the Russian Federation, they say that they will return to the implementation of the "grain agreement", but on the condition that its "agreements will be fulfilled." Recall that in the Russian Federation, they demanded the fulfillment of several conditions regarding its export of agricultural products, fertilizers, the return of Rosselkhozbank to the SWIFT international payment system, etc.
The PRC expressed hope that the grain deal would continue to be implemented by all participating countries. So on July 17, Chinese Foreign Ministry Spokesperson Mao Ning stated that: " China hopes that the grain transportation initiative will continue to be fully implemented ."
The grain deal has already been extended three times: the first time it was concluded for 120 days on November 17, the second time for 60 days on March 18, and the third time for 60 days on May 17, until July 17.
For the export of products, Ukraine will continue to use the ports of the Danube, and, possibly, will organize coastal navigation along the coasts of Ukraine, Romania, and Bulgaria (in Ukraine, the government of Ukraine promises to insure such cargoes). In turn, it can be expected that if the Russian Federation does not start attacking these ships (this is unlikely), then it will use all sorts of provocations and mining routes, and destroy the port infrastructure of Ukraine, which will complicate maritime transportation.
According to the UN, 32.8 million tons of agricultural products were exported through three Ukrainian ports. In terms of product range, corn is the leader (17 million tons exported), wheat is in second place (9 million tons), and sunflower products are in third place (2 million tons of oil and 2 million tons of seeds).
The export of Ukrainian agricultural products was mainly sent to China (7.9 million tons), Spain (5.9 million tons), Turkey (3.2 million tons), Italy (2 million tons), the Netherlands (1.92 million tons), Egypt (1.5 million tons), Bangladesh (1 million tons).
The fact is that food exports were made from Ukraine not only through the ports specified in the grain agreement but also through the ports on the river. The Danube.
Therefore, the dynamics of exports of Ukrainian agricultural products, according to the Ministry of Agrarian Policy and Food, is somewhat different from the UN data. From the beginning of the functioning of the grain deal on August 1, 2022. until the end of May 2023, Ukraine exported 65 million tons of agricultural products, of which about 49 million tons (75%) were exported through ports and only about 16 million were exported by other means of transport. In particular, railway - 10 million tons; automobile - 5 million tons; ferries - 0.64 million tons.
Due to the suspension of the grain agreement, Ukraine could lose almost a quarter of its export earnings. According to our calculations, exports through ports brought Ukraine about $14.7 billion (total export profit in 2022 was $44 billion). Tentatively, exports under the grain deal could bring Ukraine about $10 billion.
The situation for Ukraine is aggravated by the arrival of a new crop and the limited capacity of its storage.
At the same time, the suspension of the "Grain Agreement" also means the removal from Ukraine of obligations not to use the port infrastructure for military purposes. And now Ukrainian ports can also be used for the supply of weapons (of course, taking into account significant security risks).
Ruslan Bortnik, Oksana Krasovskaya, Andrey Timchenko
for the Ukrainian Institute of Politics
